Description
gives an example of how a sub franchisee agreement is formulated.
SUB – FRANCHISE AGREEMENT
01.
Nature of Instrument A Sub - Franchise Agreement
02.
Date of the Instrument 20th October, 2011
03.
Place of execution Bangalore
04.
Parties M/s XYZ, a company incorporated and existing under the Companies Act, 1956 having its registered office at 238/B AJC Bose Road, Kolkata , West Bengal , India, a closely held company consisting of three partners namely (i) ArunAgarwal (ii) VishalAgarwal and (iii) AbhijitAgarwal and being represented by ArunAgarwal
M/s. ABC, a company incorporated and existing under the Companies Act, 1956 having its registered office at 2,Dickenson Road, near Commercial Street Entrance, Bangalore 560043 , Karnataka, India, a company, being represented by Ms._Rosemary Antony, Director, (“the Sub-Franchisee”). 05. Recitals (g) The Sub-Franchisee wishes to operate the business of the Franchisor in 2,DickensonRoad, Bangalore, Karnataka, India and has put its offer to the Master Franchisor by representing that it is in a position to invest the necessary capital and expertise and also carry on the business of selling Gelato under the Franchisor’s exclusive Trade Name “DFE” through exclusive “DFE” retail outlet/s in the territories as offered by the Sub-Franchisee and accepted by the Franchiser.
06.
Acceptance of offer The Master Franchisorhas accepted the said offer of the Sub-Franchisee on the terms and conditions as agreed to and as contained herein.
07.
Definitions The following terms shall have the following meanings in this Agreement:
07.01
Accounting Reference Date 31st March every year during the subsistence of this Agreement.
07.02
Business Commencing and undertaking, from the Commencement Date, the business in the territories covered by this Agreement and such other territories as agreed to be granted by the Master Franchisor at its sole discretion to the Sub-Franchisee. Using (for mutual benefit) the Mark and the Know-How in the business of trading under the Permitted Name in the style and manner stipulated by the Franchisor for: a) retail sales;
b)
advisory and pre-launch and post-launch services only as listed in the Sub-Manual from time to time.
07.03
Commencement Date This Agreement shall be effective from 20th October 2011
07.04
Conditions The Standard Conditions and Special Conditions (if any) annexed hereto shall be considered to be incorporated in this Agreement in their entirety.
07.05
Confidentiality Agreement The agreement or undertaking annexed herewith as Annexure - I.
07.06
Confidential Information Information with respect to the process or any substantial and material part of the operating process of retail sale of the Products, and any information as defined by the Master Franchisor and agreed by the Sub-Franchisee as material to the Products or the Business.
07.07
Financial Year Each Financial Year during the Term shall commence from 1 st of April of the year and end on the 31 st March of the immediately next year.
07.08
Franchisor’s Business Business of manufacturing of Products according to the method and mechanism as devised, adopted and put to use by the Franchisor, forming a part of the Intellectual Property and marketing the Products under the Franchisor’s Intellectual Property.
07.09
Initial Fee A sum of Rs. 2 lakhs shall be paid by the Sub-Franchisee to the Master Franchisor as the Initial Fee to cover all the expenditure of the Master Franchisor on, inter alia, vetting the Sub-Franchisee, training the employees and agents of the Sub-Franchisee, pre-launch and post-launch assistance and as royalty for using the Franchisor’s brand name and concept. Supply of goods The Franchisor will supply ice-cream, packing material and other sauces/mixes at a fixed price as decided by mutual agreement with the franchisee. Ice-cream will be supplied at Rs 910 per tub (35 scoops) plus VAT. Payment to be made on monthly basis
Supply of miscellaneous goods Miscellaneous items like uniforms, name tags, scoops etc will be charged on actuals. 07.10 Intellectual Property All or any of the following: a) Trade Mark and the term “Blue Bell Creameries”, of which the Franchisor is the proprietor and in respect of which, the Franchisor has applied to the Registrar of Trade Marks, India under Trade Marks Act, 1999 for registration on 02.09.2005 vide Application nos. 01381912, 01381913 and 01381914 in Classes 29, 30 and 32 respectively;
b) c)
Trade Name “Blue Bell Creameries” under which the Franchisor sells its products; and Copyrights and Designs Rights held by and/or devised or acquired by the Franchisor in the artistic works and designs “Blue Bell Creameries” or the method of production of the products of the Franchisor under the mark “Blue Bell Creameries”.
07.11
Know-How The operational systems and methods of the Franchisor as divulged by the Master Franchisor to the Sub–Franchisee from time to time during the subsistence of this Agreement.
07.12
Location The premises as selected by the Sub-Franchisee within the Territory as assigned to it under this Agreement provided that each outlet i.e. the premises shall have a carpet area of at least 400-500 square feet.
07.13
Main Manual The Franchisor’s standard operating Manual and the confidential written systems of and regulations for the operation of the Business incorporating part of the Know-How, issued and amended by the Franchisor from time to time during the subsistence of the Main Agreement and considered to form part of the Main Agreement.
07.14
Mark/Logo The term “Blue Bell Creameries” and the logos associated with it and any additional or substitute marks, which the Franchisor shall deem suitable for the Business during the subsistence of the Main Agreement.
07.15
Minimum Package a) b) Stock of all types at each location; The minimum staff levels at each location in terms of the Sub-Manual from time to time during the Term.
07.16
Notice Period a) b) For default notice, 30 (Thirty) days; For any other notice or termination, 60 (Sixty) days.
07.17
Operating Method The method by which the Business is to be conducted by the Sub-Franchisee in the Territory in accordance with the Franchisor’s Sub-Manual using the Intellectual Property and the necessary know how, trade secrets and methods of operating the Business.
07.18
Payment Dates (a) (b) For the Initial Fee: on the signing of this Agreement. For the goods supplied: On the 1st of each month
07.19
Permitted Name The permitted business name of the Sub-Franchisee shall be “Blue Bell Creameries”.
07.20
Products The products as briefly described in the Sub-Manual and/or other products as substituted in accordance with this Agreement including but not limited to Gelato, ice-creams, fruit drinks and fruit juices, syrups and other preparations for making beverages, shakes, milk products, cream products & other beverages and other fast food items.
07.21
Signatories of Confidentiality Agreement Directors, Employees, Agents and Servants of the Sub-Franchisee or any other person, who signs the Confidentiality Agreement, excluding and contractual labour or persons engaged on daily-wage basis by the Sub-Franchisee.
07.22
Sub-Manual A part of the Franchisor’s standard operating Manual and the confidential written systems of and regulations for the operation of the Business incorporating part of the Know-How, issued and amended by the Franchisor from time to time during the subsistence of this Agreement and deemed to form part of this Agreement, excluding that related to manufacturing of products and limited to: (a) b) Retail sales; and, Advisory and pre-launch and post-launch services only as listed in the Sub-Manual from time to time.
07.23
Territory The area comprised in the geographical limits of 5 Km Radius
07.24
Trade Name “Blue Bell Creameries”
08.
No Competition The Sub-Franchisee agrees with the Master–franchisor that:
0.01
During the period of Twelve months after the termination of this Agreement, neither to be concerned or interested directly or indirectly in any business, which is identical with or similar to the Business except with the previous consent in writing of the Master Franchisor nor damage the goodwill of the Business. During the Term, not to be concerned or interested either directly or indirectly in any business, which is involved in the goods, which are similar to the Products in a Territory, where it would compete with the operations and the Business of the Franchisor or the Master Franchisor in such Territory. Not at any time within 12 (Twelve) months after the termination of this Agreement: a) To solicit the customers or former customers of the Business with the intent of taking their custom; To employ or offer to employ any person, who immediately before such employment or offer of employment was employed by the Master Franchisor.
08.02
08.03
b)
08.04
To ensure, undertake and covenant that all the directors, promoters, shareholders of the Sub-Franchisee shall be bound by the terms of this Clause and the covenants contained herein in this Agreement. Master Franchisor’s obligations
9.
The Master Franchisor agrees with the Sub-Franchisee throughout the Term: 09.01 To permit the Sub-Franchisee to carry on Business a) To permit the Sub-Franchisee to carry on and operate the Business under the Permitted Name or such other names and styles as may be specified or approved in writing by the Master Franchisor; and To promote the Business under the Permitted Name in accordance with the terms of this Agreement at the sole cost and expense of the Sub-Franchisee.
b)
09.02
General advertising Subject to the performance of its obligations by the Sub-Franchisee, the Master Franchisor may promote the Trade Name and Operating Method in the Territory in such newspapers, magazines, radio, television, directories, pamphlets or other media, as it may from time to time consider suitable.
09.03
Equipment To arrange for the placement of the necessary orders and indents for and on behalf of the SubFranchisee of all equipment, machineries, installations and accessories for the Location(s) in the Territory at the sole cost and expense and charges of the Sub-Franchisee subject, however, that such orders shall be placed as per the specifications in the Sub-Manual and the minimum break even order to be placed.
09.04
Consultation a) To give to the Sub-Franchisee the benefit of its knowledge and experience in connection with any problems relating to the operations and Operating Method; and, To make available as promptly as is reasonably practicable members of Master Franchisor’s staff competent to give such advice or assistants as may be possible or necessary, as and when so requested by the Sub-Franchisee.
b)
09.05
Procuring Supplies To assist the Sub-Franchisee in procuring such supplies and equipment as may be required by the SubFranchisee for the effective and smooth operations at the sole cost and expense of the Sub-Franchisee and also to assist the Sub-Franchisee in negotiating the terms with the suppliers.
09.06
No discrimination between sub-franchisees To make available to the Sub-Franchisee all services and facilities, which the Master-Franchisor will in the ordinary course of its Business and operations, provide to various sub-franchisees other than the sub-franchisee.
09.07
Extension of Territory To give the Sub-Franchisee not less than 30 (Thirty) days prior written notice of the Master Franchisor’s intention to appoint any person other than the Sub-Franchisee in any place adjoining the Territory of the Sub-Franchisee.
09.08
Extension of Term To extend at its option after negotiations with the Franchising arrangement as being undertaken under this Agreement for such further period(s) and on such terms as may be agreed to in writing between the Parties.
10.
Sub-Franchisee’s Obligations The Sub-Franchisee agrees with the Master Franchisor throughout the Term:
10.01
Commencement conditional on Training Not to commence the business at the Location until the Sub-Franchisee or the persons duly authorized are fully trained to the complete satisfaction of the Master Franchisor. Only such trained persons shall be engaged by the Sub-Franchisee for the management of the Business.
10.02
No Untrained Personnel Not to permit any person to act or assist in the Business without undergoing the proper training required to handle the operations at the Location as per the Sub-Manual provided by the Master Franchisor.
10.03
Training of Staff To ensure that its staff and their replacements and all other persons required under the terms of this Agreement undergo training at periodical intervals in accordance with the Sub-Manual and the necessary modifications and improvement are brought in through such training.
10.04
Training Expenses To pay for all the costs and expenses of whatsoever nature incurred by the Master Franchisor in the performance of the obligations under this Agreement, which fall under the domain of the Master Franchisor’s obligations.
10.05
Grant and Reservations In consideration of the payment of the Initial Fee, the Minimum Fee, the Continuing Fees and Advertising Contribution by the Sub-Franchisee to the Master Franchisor and subject to the agreements and the conditions on the part of the Sub-Franchisee in this Agreement, the Master Franchisor hereby grants to the Sub-Franchisee, the right of using the Mark and Know-How and carrying on the business of retailing the Products only: a) in the Business;
b) at and from the Location; c) within the Territory;
d) for the Term; e) f) 10.06 under the Permitted Name; and in accordance with the Sub-Manual.
The Franchisor according to the terms of the Main Agreement reserves the right to withdraw from its range of Products or add to its existing range of Products, the franchise of further products as launched by the Franchisor in the market in any part of the operations of the Master Franchisor or the SubFranchisee.
10.07 Minimum Working Hours To ensure that the Business is operated for the minimum hours as is usual in the area in which the outlets are situated so as to achieve the maximum operative results. 10.08 Diligence At all times to work diligently to protect and promote the interests of the Master Franchisor.
10.09 Payments To pay to the Master Franchisor or to its order without demand, deduction or set off on the relevant dates, (time being the essence) the Initial Fee and all other costs and expenses as payable in terms of this Agreement by the Sub-Franchisee to the Master Franchisor. 10.10 No competing products a) Not to manufacture, sell, market or use in the course of the provision of the products competing with the Products of the Master Franchisor. b) Not to seek customers for the Products outside the territory. 10.11 No change of Location Not to change and/or shut down (whether temporarily or permanently) the operations of any Location of the Business within the territory without prior written consent of the Master Franchisor. 10.12 Interests in competitors Not acquire any financial interests in the capital of a competing entity or undertaking, which would give the Sub-Franchisee power to influence the economic conduct of such entity or undertaking and/or prejudicially affect the business interests and prospects of the Master Franchisor unless mutually agreed between the parties. 10.13 Compliance To obey the conditions, restrictions and other covenants as contained in the Sub-Manual and the instructions regarding the Business and more particularly the quality control and the customer satisfaction. 10.14 Sales reports To supply to the Master Franchisor, by courier service or registered post or by facsimile or by electronic means (if required by the Master Franchisor), on a weekly basis sales reports and other information in the form stipulated by the Master Franchisor in the Sub-Manual concerning the Business. 10.15 Feedback To communicate to the Master Franchisor any experience gained in the Business, which may improve the quality, presentation, packing etc. of the products and/or the Operating Method and to grant, free of charge, to the Master Franchisor and to other sub-franchisees of the Master Franchisor, a non-exclusive license to use any such improvements. 10.16 Maximum prices Not to advertise or charge customers prices in excess of the prices specified by the Master Franchisor in the Sub-Manual from time to time. 11.17 Disclosure On entering into this Agreement or any other agreement or transaction with the Master Franchisor during the Term, to make full disclosure of all material circumstances and of everything known to it with respect to the subject matter of the contract or transaction, which would be likely to influence the conduct or business of the Master Franchisor 11.18 Pass on information a) To immediately forward, to the Master Franchisor, any trade enquiry from prospective sub-franchisees and other prospective business associations and affiliations or other business leads outside the Territory. b) To pass on any information to the Master Franchisor, which may reduce the turnover of the Business in any way. 11.19 Registration of License of Intellectual Property If and when so required by the Master Franchisor, to register or join with the Master Franchisor in registering particulars of this Agreement or any other relevant agreement or documents with the concerned competent authorities. 11.20 Protection of Intellectual Property Not cause or permit anything, which may damage or endanger the Intellectual Property, as defined hereinbefore, or other intellectual property of the Franchisor or the Franchisor’s title to the Intellectual Property or assist or permit others to do so.
11.21 Secrecy Not at any time, during or after the Term to divulge or allow to be divulged to any person any Confidential Information other than to persons, who have signed the Confidentiality Agreement in the form approved by the Master Franchisor. Only the Signatories of Confidentiality Agreement shall have access to the whole operating process of retail sale of the Products manufactured under the Trade Name “BLUE BELL CREAMERIES”. 11.22 Maintenance of the accounts and other administrative responsibilities and obligations. The Sub-Franchisee shall, at all times during the Term, maintain, accurate and separate records and accounts in respect of the conduct of the Business in terms of this Agreement so as to effectively and smoothly run the operations of the Business during the Term and to ensure that all the statutory compliances in this regard are effectively made so as not to affect, in any manner, the Business prospects or other interests of the Master Franchisor. 11.23 Notice To comply within 90 (Ninety) days with the terms of any Default Notice specifying a breach of the provisions of this Agreement and requiring the breach to be remedied so far as it may be but nothing in this Sub-Clause is intended to require the Master Franchisor to serve notice of any breach before taking any action in respect of it. 11.24 Best endeavours To use its best endeavour to sell the products in terms of this Agreement as per the qualitative control and standards as laid down in the Sub-Manual and as modified or changed from time to time during the Term so as to render the best service to the customers and achieve higher turnover.. 11.25 Protect goodwill To protect and promote the goodwill of the Products and the Franchisor throughout the Term. 11.26 No other Business at the Location It cannot carry on or permit to carry on any other business at the location nor can it extend the scope or the range of Business, unless mutually agreed by the Parties. Business not to be carried on other than from the Location Business or any part of the Business should not be carried from any premises other than the one, which is a Location, duly approved in writing by the Master Franchisor. Orderly conduct It should conduct the Business in an orderly and businesslike manner and to strictly comply with all the policies and operating standards that may from time to time be specified by the Master Franchisor and more particularly, in the Sub-Manual and maintain the standards of the quality in production of the Products, sale and services to the customers. Compliance with laws Conduct the Business in compliance with all the applicable Central and State laws, bye-laws, rules and regulations of the Government, Statutory Authority, Local Authority or any other Authority having jurisdiction over the Territory or any part or on a specific Location. Payment for supplies To promptly and timely pay all the payments with respect to the supply of the raw materials, other materials, products, services and all other charges and levies for the conduct of the Business. Interiors and exteriors of the Location The interior and the exterior finishing of the Location should be as per the arrangement with the Master Franchisor and uniformity should be maintained with respect to the same. All rights and benefits emanating from the Shareholding participation All the benefits, rights, privileges, profits, amenities etc. should be made available at all times to the Master Franchisor which accrue to a member/shareholder of the Sub-Franchisee (directly or indirectly) in the ordinary course as well in the specific circumstances in terms of this Agreement.
11.27
11.28
11.29
11.30
11.31
11.32
11.33
Indemnity To indemnify and keep indemnified the Master Franchisor from and against all and any loss, damage, liability claims, actions, suits and proceedings whether civil or criminal and all costs, charges, expenses, losses or damages suffered or caused including the legal fees and costs incurred by the Master Franchisor because ofa) b) c) any neglect, default, breach, non-observance, non-performance by the Sub-Franchisee and/or its agents, employees etc. in connection with the Business or Location; any other reason so long as such loss, damage, liability, fees or costs resulted from the Business and was not due to any default of the Master Franchisor; and, the Sub-Franchisee not having good and valid power and absolute and un-restricted right to enter into this Agreement and to arrive at all suitable arrangements in respect thereof. The Sub-Franchisee undertakes that it has complied with and fulfilled, in all respects, all the requisite compliances and the requirements of the statutory provisions applicable to the Business. In the event of there being any defect or deficiency or inadequacy in the SubFranchisee’s right to execute this Agreement, the Sub-Franchisee undertakes to indemnify the Master Franchisor against all consequences arising therefrom including damages, losses, costs or any other claims and demands relating thereto.
11.34
No sub-licenses Should not grant any sub-licenses in respect of the Business covered by this Agreement Change in the constitution Because this Agreement and all the rights and licenses granted to the Sub-Franchisee are not assignable, either wholly or partly, save as in accordance with the provisions contained in this Agreement, there cannot be any change in the constitution of the Board of Directors and the management of the Sub-Franchisee without the prior consent of the Master Franchisor. No description as agent Sub-Franchisee cannot describe itself or act as agent or representative of the Master Franchisor except as expressly authorized by this Agreement. Pricing policy Adopt a standard pricing policy for the conduct of the Business during the Term. Employee dues Should promptly and timely pay off all the legitimate dues of the employees of the Business and comply with all the labour laws with respect to conduct of the Business. Staff dress and appearance They should ensure that all staff engaged in the operation of the Business at a Location follows a uniform dress code as adopted and they render competent, sober and courteous services to the customers in accordance with the procedure laid down in the Sub-Manual. No advertisement They should not procure advertisement, signs, entry or any other publicity whether relating to the Business or not or displayed on or at a Location unless the same has been firstly submitted to and approved in its contents and pattern, appearance and size by the Master Franchisor. No other vending machines Should not install and operate at a Location any vending machine other than that of the Franchisor or the Master Franchisor or purchased from a supplier duly authorized by the Franchisor or the Master Franchisor in terms of this Agreement. No warranty Should not make any representations or warranty to the customers other than those, which are permissible under the Sub-Manual. Insurance
11.35
11.36
11.37
11.38
11.39
11.40
11.41
11.42
11.43
They should obtain and keep in full force and effect, at all times, a comprehensive policy or policies of insurance covering the Location, equipments and installations and furniture and fixture and fitting therein against fire, terrorism, natural calamities like earthquake, flood, storm, riots etc. and also covering the public liability for the injury to persons or property within policy limits. Further they should not cause or permit breach of any insurance policy maintained under the terms of this Agreement and timely pay the premium of all the insurance policies so as to maintain them in operation at all points of time.
12.
Termination This Agreement shall terminate as follows:-
12.01
Time On the date of Expiry Non achievement of the breakeven point within the stipulated period In the breakeven sales and/or the minimum performance level as set out in the Sub-Manual is not achieved within Territory, then in such an event, the Master Franchisor, at its sole discretion, may require this Agreement to continue or terminate it by giving the due notice of termination as per the time frame laid down in this Agreement. Fundamental Breach On the occurrence of any of the following events, which are fundamental breaches of this Agreement by Sub-Franchisee : a) b) c) d) Failure to comply with the Default Notice within the time stipulated but the Master Franchisor need not serve any notice before taking an action in respect of any breach; Failure to make the payments on the relevant date and time; Any breach by the Sub-Franchisee of any covenant with respect to the protection of Intellectual Property (Sub-Clause 11.25) or compliance of laws (Sub-Clause 11.34); Any challenge by the Sub-Franchisee to the validity of any part of the Intellectual Property.
12.02
12.03
Provided that the Master Franchisor waive, only through a written communication addressed to the Sub-Franchisee and not otherwise, any breach (including a fundamental breach) of this Agreement by the Sub-Franchisee. 12.04 Insolvency If the Master Franchisor and/or the Sub-Franchisee is dissolved or if a receiver is appointed in respect of the whole or any part of its assets or if the Master Franchisor and/or the Sub-Franchisee makes an assignment for the benefit of or composition with its creditors generally or threatens to do any of these things or if any judgment is made against the Master Franchisor and/or the Sub-Franchisee or if any similar occurrence in any jurisdiction, adversely affects the Master Franchisor and/or the SubFranchisee. Conduct prejudicial If the Sub-Franchisee engages in any conduct prejudicial to the business or the sale and marketing of the Products generally. Low orders If the Minimum Performance is not achieved at any time or during the period stipulated in Sub-Clause 15.18 of this Agreement or for two consecutive Financial Years during the Term provided then in such an event, the Master Franchisor, at its sole discretion, may require this Agreement to continue and may treat such lack of achievement as an event to which Sub-Clause 15.18 shall apply. Change in the management or control If any material change occurs in the management or control of the Business and in particular any change in the Board of Directors or the management of the Sub-Franchisee save in accordance with the provisions of this Agreement.
12.05
12.06
12.07
12.08
Notice If either of the Parties gives ninety days prior written notice to the other party, expiring at any time, not earlier than thirty-six months after the Commencement Date, and the other Party conveys, to the Party giving the notice, its acceptance of termination on the terms set out in the said notice. Termination of the Main Agreement On the termination of the Main Agreement, this Agreement and all sub-franchise arrangements under it shall automatically stand terminated and come to an end and the Franchisor shall have no responsibility or liability whatsoever towards the Sub-Franchisee under the Master Franchisor with respect to the conduct of the Sub-Franchise arrangement.
12.09
13.
Default Notice In the event of any breach by the Sub-Franchisee of any of the provisions of this Agreement other than a fundamental breach as specified before, the Master Franchisor may serve a Default Notice requiring the breach to be remedied within a period of 30 days. Notwithstanding the above, the Franchisor need not serve any notice of the breach before taking any action in respect thereof.
14. 14.01
Termination Consequences Procedure On the termination of this Agreement, the Sub-Franchisee hereby undertakes to do the following: a) b) To dispose of all the stocks in hand in accordance with the Master Franchisor’s directions; To sign such notification of the use of the Intellectual Property as is required by the Master Franchisor; To give due notice of the cessation of the Sub-Franchise Agreement to all persons concerned whether directly or indirectly, in the course of the conduct of the Business; To return to the Master Franchisor all the originals and copies of all the documents and information in any form containing or covering in any way any part of the Intellectual Property including Sub-Manual; Immediately cease carrying on the Business; and To remove all the hoardings, signages, insignias etc. of the Franchisor’s Business from the Location, whether within the Territory or outside the same.
c)
d)
e) f)
15. 15.01
Miscellaneous Change of directors or shareholders In the event of the death or retirement of any director or change of the shareholders of the SubFranchisee, the appointment or substitution of such Director or the transfer of the shareholding, as the case may be, shall be subject to the prior written approval of the Master Franchisor, which shall not be unreasonably withheld and such appointee or substitute Director and transferee shareholder shall be bound by and shall also abide by the terms and conditions of this Agreement. Sale of the Business a) If at any time the Sub-Franchisee wishes to sell, transfer, assign or otherwise part with the Business or any part of it or the Location or any interest or right therein, it shall immediately give a notice of that desire to the Master Franchisor and offer by notice in writing to the Master Franchisor to sell the same to the Master Franchisor;
15.02
b)
If the Master Franchisor accepts the offer of the Sub-Franchisee within a period of 30 (Thirty) days from the date of the receipt of such notice, the Sub-Franchisee shall sell and the Master Franchisor shall purchase the assets as included in the offer on the terms and conditions as agreed to and subject to the conditions mentioned hereinafter for a consideration and such sale shall be completed within a period of 60 (Sixty) days from the date of the acceptance of the offer of purchase by the Master Franchisor; The price and the conditions of such sale and purchase shall be as agreed between the Parties the price representing the net market value of the assets to be sold but without taking into account goodwill or any additional value arising from a sale of Business as a going concern and the conditions shall be such as in the circumstances would be normal and reasonable and in the event of a failure to agree on a price and conditions these shall be settled by a Chartered Accountant chosen by the Parties. The Master Franchisor will be entitled to deduct a sum equivalent to 20% (Twenty Percent) of the value of the assets being purchased by him from the consideration, as payable to the SubFranchisee as a fee for the closure of the Business at a Location; If Master Franchisor declines the offer of the Sub-Franchisee or fails to communicate its acceptance of offer to the Sub-Franchisee within the stipulated time, the Sub-Franchisee shall be free within 3 (Three) months of such notice to sell, transfer, assign or lease or otherwise part with the Business or any part of it or the Location or any part of its interest in them as set out in the notice to the Master Franchisor; The Sub-Franchisee shall pay to the Master Franchisor the reasonable costs and expenses incurred by the Master Franchisor in the assessment of any and each person for approval.
a)
e)
f)
g)
15.03
Master Franchisor’s right to the Operating Method The Sub-Franchisee acknowledges the Master Franchisor’s exclusive rights: a) to the Operating Method and all constituents thereof including, without limitation all the amendments and modifications to it; b) to make such additions or modifications to the Operating Method including the addition, renewal or substitution of intellectual property rights, as may from time to time, appear to the Master Franchisor necessary to promote and improve the Operating Method and to amend or revise the Manual accordingly; c) d) to itself use and grant license to others to use the Operating Method; and, to grant this licence to the Sub-Franchisee.
15.04
Other Licenses The Master Franchisor may, without any liability to the Sub-Franchisee, grant a license to any other entity outside the Territory a) b) c) to sell Products; or to use Intellectual Property; or for any purposes,
except in direct competition with the Sub-Franchisee in the Business in the Territory. The Master Franchisor or any of its other sub-franchisees using the Operating Method may sell to the customers through an outlet located outside the Territory without any liability to the Sub-Franchisee even if the supplies to any such customers are delivered into the Territory. 15.05 Interest
All sums due from either of the Parties to the other, which are not paid on the due date (without prejudice to the rights of the Master Franchisor under this Agreement), shall bear interest from day to day at the annual rate of 18 % (Eighteen Percent) per annum. 15.06 Force Majeure Both Parties shall be released from their respective obligation in the event of any Location or any part thereof being destroyed or damaged by fire (not caused by the willful act or negligence of the SubFranchisee), storm, flood, tempest, earthquake, lightning, enemies, war, riot, civil commotion or any other irresistible force or act beyond the control of the Parties renders performance of this Agreement impossible whereupon: a) b) c) All money due to the Master Franchisor shall be paid immediately; The Sub-Franchisee shall forthwith cease carrying on the Business; and, The Master Franchisor shall not be obliged to continue its obligations under this Agreement save as otherwise provided in this Agreement.
15.07
Severance In case any provision of this Agreement is declared or held to be void, voidable, illegal, invalid or otherwise unenforceable in any jurisdiction under any law applicable, the Parties shall amend or modify or delete that provision in such reasonable manner as achieves the intention of the Parties without illegality or at the discretion of the Master Franchisor, it may be severed from this Agreement and the remaining provisions of this Agreement shall remain in full force and effect.
15.08
Retention of Title c) The Products and goods delivered by the Master Franchisor to the Sub-Franchisee shall remain the sole and absolute property of the Master Franchisor as legal and equitable owner until such time as all money due to the Master Franchisor has been paid to the Sub-Franchisee but shall be at the Sub-Franchisee’s risk from the time of delivery to it; Until delivery to a purchaser, the Sub-Franchisee undertakes to store such goods on its premises separately from its own goods or those of any other person and in a manner which makes them readily identified as the Master Franchisor’s goods; The Sub-Franchisee’s rights to possession of goods shall cease if it does anything or fails to do anything which would entitle the receiver to take possession of the assets.
d)
e)
15.09
Supersedes prior Agreements and changes/modifications This Agreement supersedes any prior agreement between the Parties, whether written or oral, and any such prior agreements are cancelled as at the Commencement Date but without prejudice to any rights which have already accrued to either of the Parties.
15.10
Low sales The Master Franchisor may terminate this Agreement if the Minimum Performance arising from the Business at the Location is not achieved within 2 (Two) years of the Commencement Date of this Agreement or for a continuous period of 12 (Twelve) months at any time thereafter during the Term provided.
15.11
Payment not on time In the event that the Sub-Franchisee fails to pay any money due to the Master Franchisor on time, the Master Franchisor may, at its option:
a)
cease immediately to take orders from and to deliver goods and services to the SubFranchisee; and/or, impose whatever credit limit it considers appropriate in respect of the Business of the SubFranchisee.
b)
15.12
Change of address Each of the Parties shall give notice to the other of change or acquisition of any address or telephone, fax, telex or similar number as soon as practicable and in any event within 48 (Forty-eight) hours of such change or acquisition.
15.13
Notices/Communications Any notice, letter, communication etc. to be made, communicated to either of the Parties shall be in writing and shall be deemed to be duly communicated only if the notice or letter or communication is addressed to the other Party at the addresses as mentioned in this Agreement or such other address, as may be intimated by one Party to the other in this behalf and sent by courier service or registered post or by facsimile or by electronic means (if required by the Master Franchisor), and shall be deemed to have been received by the addressee within 72 (seventy-two) hours of posting or 24 (twenty-four) hours if sent by facsimile to the correct facsimile number of the addressee.
15.14
Dispute Resolution & mechanism a) Arbitration Clause: That in the event of any dispute or difference between the Parties regarding this Agreement or otherwise, the Parties shall enter, in good faith, into negotiations aimed at finding an amicable solution. If the dispute cannot be resolved in a satisfactory manner, either Party may refer the matter to a sole Arbitrator to be nominated by both the Parties with mutual consent. The decision of the Arbitrator shall be binding and final. The provisions of the Arbitration and Conciliation Act, 1996 or any other statutory amendment, for the time being in force, shall apply.
b) Jurisdiction of Courts: That this Agreement and the rights and obligations of the Parties under this Agreement shall be construed and enforced in accordance with the laws of India. 15.15 Costs & expenses Each of the Parties shall pay the costs and expenses incurred by it in connection with this Agreement including the legal costs in connection with the negotiation and preparation of this Agreement and the consummation of the transactions contemplated hereby.
Signed by For and on behalf of M/s. Blue Bell Creameries
Tanya Sharma Partner Signed by For and on behalf of M/s. __________________________
_________________
Director WITNESSES: 1. Name : _____________________ s/o/d/o/w/o: _________________ Address : ___________________ ___________________ Occupation : _________________ I.D. No. : ___________________
2. Name : _____________________ s/o/d/o/w/o: _________________ Address : ___________________ ___________________ Occupation : _________________ I.D. No. : ___________________
Group’s Contribution:
1. Right to grants and reservation: Grant by the Master Franchisor to the Sub-Franchisee to use its Mark and Know-How of the retailing of products with the reservations over Business, Location, Territory, Term and Permitted name in accordance with the Sub-manual. Right of withdrawal from or addition to the existing range of products by the Master Franchisor to the Sub Franchisee. 2. Condition over competing products: Not to seek customers for the products outside the specified territory. Knowledge/Feedback: The Sub-Franchisee must share with the Master Franchisor any experience or knowledge gained during the process of business which may help in the operations of the Master Franchisor and/or other subfranchisees. The Master Franchisor will have a non-exclusive right over the use of such improvements, granted for free by the Sub-Franchisee. Pass on information: The Sub-Franchisee must share each and every information with the Master Franchisor, which may, in any way, reduce or increase the turn-over of the business. Agency: The Sub-Franchisee cannot describe itself or act as agent or representative of the Master Franchisor except as expressly authorized by this Agreement. No advertisement: The Sub- Franchisee should not procure advertisement, signs, entry or any other publicity whether relating to the Business or not to be displayed on or at a Location unless the same has been firstly submitted to and approved in its contents and pattern, appearance and size, by the Master Franchisor.
3.
4.
5.
6.
7.
Breach of contract: In case of failure to comply with the Default Notice, by the Sub-Franchisee, within the time stipulated, the Master Franchisor need not serve any notice before taking an action in respect of any breach. Cessation of Sub-Franchisee: The Sub-Franchisee must give due notice of the cessation of the Sub-Franchise Agreement to all persons concerned whether directly or indirectly, in the course of the conduct of the Business. Deduction of fee: The Master Franchisor will be entitled to deduct a sum equivalent to 20% (Twenty Per cent) of the value of the assets being purchased by him from the consideration, as payable to the Sub-Franchisee as a fee for the closure of the Business at a Location.
8.
9.
10. Interest: All sums due from either of the Parties to the other, which are not paid on the due date (without prejudice to the rights of the Master Franchisor under this Agreement), shall bear interest from day to day at the annual rate of 18 % (Eighteen Per cent) per annum. 11. Possession of assets: The Sub-Franchisee’s rights to possession of goods shall cease if it does anything or fails to do anything which would entitle the receiver to take possession of the assets. 12. Low Sales: The Master Franchisor may terminate this Agreement if the Minimum Performance arising from the Business at the Location is not achieved within 2 (Two) years of the Commencement Date of this Agreement or for a continuous period of 12 (Twelve) months at any time thereafter during the Term provided by the Sub-Franchisee. 13. Arbitration Clause: In case of the involvement of an arbitrator, owing to any dispute or difference between the parties regarding this Agreement or otherwise, the provisions of the Arbitration and Conciliation Act, 1996 or any other statutory amendment, for the time being in force, shall apply.
Group’s review:
The given Franchisee agreement covers all of the following topics discussed in class:
1.
A contract should be an agreement between [b/w] 2 OR more parties: The agreement here is between M/s XYZ (the Master Franchisor) and M/s ABC (the Sub-Franchisee). Offer: ABC made an offer which was accepted by XYZ i.e. Valid acceptance of offer. A lawful consideration: Fee paid by ABC to XYC in return for the Sub-Franchisee (supply of goods). ? It is not forbidden by law. ? It does not defeat any provision of law. ? It does not cause any injustice OR injury to another person OR his property. ? It is not opposed as public policy OR regarded as immoral. ? It is not fraudulent. It is terms of both cash and kind.
2.
3.
4.
The agreement is not expressly declared to be void by law
5.
The terms must be certain: The location, terms of agreement, mark/logo, fee payment, operation method, products etc. have been explicitly described and there is no vagueness in the agreement. All the terms have been defined and described in detail in the parts 1-7. Free consent of the parties Both the Sub-Franchisee (ABC) and the Master Franchisor (XYZ), have entered into the contract under free consent. Parties are competent to contract Both the Sub-Franchisee (ABC) and the Master Franchisor (XYZ) do not fall in any category of ‘Parties incompetent to contract’. The contract is enforceable by law The agreement between XYZ and ABC is enforceable by law as it clearly mentions: ? Compliance with law ? Fundamental breach ? Default notice ? Notice/Communications ? Arbitrations
6.
7.
8.
doc_154199154.docx
gives an example of how a sub franchisee agreement is formulated.
SUB – FRANCHISE AGREEMENT
01.
Nature of Instrument A Sub - Franchise Agreement
02.
Date of the Instrument 20th October, 2011
03.
Place of execution Bangalore
04.
Parties M/s XYZ, a company incorporated and existing under the Companies Act, 1956 having its registered office at 238/B AJC Bose Road, Kolkata , West Bengal , India, a closely held company consisting of three partners namely (i) ArunAgarwal (ii) VishalAgarwal and (iii) AbhijitAgarwal and being represented by ArunAgarwal
M/s. ABC, a company incorporated and existing under the Companies Act, 1956 having its registered office at 2,Dickenson Road, near Commercial Street Entrance, Bangalore 560043 , Karnataka, India, a company, being represented by Ms._Rosemary Antony, Director, (“the Sub-Franchisee”). 05. Recitals (g) The Sub-Franchisee wishes to operate the business of the Franchisor in 2,DickensonRoad, Bangalore, Karnataka, India and has put its offer to the Master Franchisor by representing that it is in a position to invest the necessary capital and expertise and also carry on the business of selling Gelato under the Franchisor’s exclusive Trade Name “DFE” through exclusive “DFE” retail outlet/s in the territories as offered by the Sub-Franchisee and accepted by the Franchiser.
06.
Acceptance of offer The Master Franchisorhas accepted the said offer of the Sub-Franchisee on the terms and conditions as agreed to and as contained herein.
07.
Definitions The following terms shall have the following meanings in this Agreement:
07.01
Accounting Reference Date 31st March every year during the subsistence of this Agreement.
07.02
Business Commencing and undertaking, from the Commencement Date, the business in the territories covered by this Agreement and such other territories as agreed to be granted by the Master Franchisor at its sole discretion to the Sub-Franchisee. Using (for mutual benefit) the Mark and the Know-How in the business of trading under the Permitted Name in the style and manner stipulated by the Franchisor for: a) retail sales;
b)
advisory and pre-launch and post-launch services only as listed in the Sub-Manual from time to time.
07.03
Commencement Date This Agreement shall be effective from 20th October 2011
07.04
Conditions The Standard Conditions and Special Conditions (if any) annexed hereto shall be considered to be incorporated in this Agreement in their entirety.
07.05
Confidentiality Agreement The agreement or undertaking annexed herewith as Annexure - I.
07.06
Confidential Information Information with respect to the process or any substantial and material part of the operating process of retail sale of the Products, and any information as defined by the Master Franchisor and agreed by the Sub-Franchisee as material to the Products or the Business.
07.07
Financial Year Each Financial Year during the Term shall commence from 1 st of April of the year and end on the 31 st March of the immediately next year.
07.08
Franchisor’s Business Business of manufacturing of Products according to the method and mechanism as devised, adopted and put to use by the Franchisor, forming a part of the Intellectual Property and marketing the Products under the Franchisor’s Intellectual Property.
07.09
Initial Fee A sum of Rs. 2 lakhs shall be paid by the Sub-Franchisee to the Master Franchisor as the Initial Fee to cover all the expenditure of the Master Franchisor on, inter alia, vetting the Sub-Franchisee, training the employees and agents of the Sub-Franchisee, pre-launch and post-launch assistance and as royalty for using the Franchisor’s brand name and concept. Supply of goods The Franchisor will supply ice-cream, packing material and other sauces/mixes at a fixed price as decided by mutual agreement with the franchisee. Ice-cream will be supplied at Rs 910 per tub (35 scoops) plus VAT. Payment to be made on monthly basis
Supply of miscellaneous goods Miscellaneous items like uniforms, name tags, scoops etc will be charged on actuals. 07.10 Intellectual Property All or any of the following: a) Trade Mark and the term “Blue Bell Creameries”, of which the Franchisor is the proprietor and in respect of which, the Franchisor has applied to the Registrar of Trade Marks, India under Trade Marks Act, 1999 for registration on 02.09.2005 vide Application nos. 01381912, 01381913 and 01381914 in Classes 29, 30 and 32 respectively;
b) c)
Trade Name “Blue Bell Creameries” under which the Franchisor sells its products; and Copyrights and Designs Rights held by and/or devised or acquired by the Franchisor in the artistic works and designs “Blue Bell Creameries” or the method of production of the products of the Franchisor under the mark “Blue Bell Creameries”.
07.11
Know-How The operational systems and methods of the Franchisor as divulged by the Master Franchisor to the Sub–Franchisee from time to time during the subsistence of this Agreement.
07.12
Location The premises as selected by the Sub-Franchisee within the Territory as assigned to it under this Agreement provided that each outlet i.e. the premises shall have a carpet area of at least 400-500 square feet.
07.13
Main Manual The Franchisor’s standard operating Manual and the confidential written systems of and regulations for the operation of the Business incorporating part of the Know-How, issued and amended by the Franchisor from time to time during the subsistence of the Main Agreement and considered to form part of the Main Agreement.
07.14
Mark/Logo The term “Blue Bell Creameries” and the logos associated with it and any additional or substitute marks, which the Franchisor shall deem suitable for the Business during the subsistence of the Main Agreement.
07.15
Minimum Package a) b) Stock of all types at each location; The minimum staff levels at each location in terms of the Sub-Manual from time to time during the Term.
07.16
Notice Period a) b) For default notice, 30 (Thirty) days; For any other notice or termination, 60 (Sixty) days.
07.17
Operating Method The method by which the Business is to be conducted by the Sub-Franchisee in the Territory in accordance with the Franchisor’s Sub-Manual using the Intellectual Property and the necessary know how, trade secrets and methods of operating the Business.
07.18
Payment Dates (a) (b) For the Initial Fee: on the signing of this Agreement. For the goods supplied: On the 1st of each month
07.19
Permitted Name The permitted business name of the Sub-Franchisee shall be “Blue Bell Creameries”.
07.20
Products The products as briefly described in the Sub-Manual and/or other products as substituted in accordance with this Agreement including but not limited to Gelato, ice-creams, fruit drinks and fruit juices, syrups and other preparations for making beverages, shakes, milk products, cream products & other beverages and other fast food items.
07.21
Signatories of Confidentiality Agreement Directors, Employees, Agents and Servants of the Sub-Franchisee or any other person, who signs the Confidentiality Agreement, excluding and contractual labour or persons engaged on daily-wage basis by the Sub-Franchisee.
07.22
Sub-Manual A part of the Franchisor’s standard operating Manual and the confidential written systems of and regulations for the operation of the Business incorporating part of the Know-How, issued and amended by the Franchisor from time to time during the subsistence of this Agreement and deemed to form part of this Agreement, excluding that related to manufacturing of products and limited to: (a) b) Retail sales; and, Advisory and pre-launch and post-launch services only as listed in the Sub-Manual from time to time.
07.23
Territory The area comprised in the geographical limits of 5 Km Radius
07.24
Trade Name “Blue Bell Creameries”
08.
No Competition The Sub-Franchisee agrees with the Master–franchisor that:
0.01
During the period of Twelve months after the termination of this Agreement, neither to be concerned or interested directly or indirectly in any business, which is identical with or similar to the Business except with the previous consent in writing of the Master Franchisor nor damage the goodwill of the Business. During the Term, not to be concerned or interested either directly or indirectly in any business, which is involved in the goods, which are similar to the Products in a Territory, where it would compete with the operations and the Business of the Franchisor or the Master Franchisor in such Territory. Not at any time within 12 (Twelve) months after the termination of this Agreement: a) To solicit the customers or former customers of the Business with the intent of taking their custom; To employ or offer to employ any person, who immediately before such employment or offer of employment was employed by the Master Franchisor.
08.02
08.03
b)
08.04
To ensure, undertake and covenant that all the directors, promoters, shareholders of the Sub-Franchisee shall be bound by the terms of this Clause and the covenants contained herein in this Agreement. Master Franchisor’s obligations
9.
The Master Franchisor agrees with the Sub-Franchisee throughout the Term: 09.01 To permit the Sub-Franchisee to carry on Business a) To permit the Sub-Franchisee to carry on and operate the Business under the Permitted Name or such other names and styles as may be specified or approved in writing by the Master Franchisor; and To promote the Business under the Permitted Name in accordance with the terms of this Agreement at the sole cost and expense of the Sub-Franchisee.
b)
09.02
General advertising Subject to the performance of its obligations by the Sub-Franchisee, the Master Franchisor may promote the Trade Name and Operating Method in the Territory in such newspapers, magazines, radio, television, directories, pamphlets or other media, as it may from time to time consider suitable.
09.03
Equipment To arrange for the placement of the necessary orders and indents for and on behalf of the SubFranchisee of all equipment, machineries, installations and accessories for the Location(s) in the Territory at the sole cost and expense and charges of the Sub-Franchisee subject, however, that such orders shall be placed as per the specifications in the Sub-Manual and the minimum break even order to be placed.
09.04
Consultation a) To give to the Sub-Franchisee the benefit of its knowledge and experience in connection with any problems relating to the operations and Operating Method; and, To make available as promptly as is reasonably practicable members of Master Franchisor’s staff competent to give such advice or assistants as may be possible or necessary, as and when so requested by the Sub-Franchisee.
b)
09.05
Procuring Supplies To assist the Sub-Franchisee in procuring such supplies and equipment as may be required by the SubFranchisee for the effective and smooth operations at the sole cost and expense of the Sub-Franchisee and also to assist the Sub-Franchisee in negotiating the terms with the suppliers.
09.06
No discrimination between sub-franchisees To make available to the Sub-Franchisee all services and facilities, which the Master-Franchisor will in the ordinary course of its Business and operations, provide to various sub-franchisees other than the sub-franchisee.
09.07
Extension of Territory To give the Sub-Franchisee not less than 30 (Thirty) days prior written notice of the Master Franchisor’s intention to appoint any person other than the Sub-Franchisee in any place adjoining the Territory of the Sub-Franchisee.
09.08
Extension of Term To extend at its option after negotiations with the Franchising arrangement as being undertaken under this Agreement for such further period(s) and on such terms as may be agreed to in writing between the Parties.
10.
Sub-Franchisee’s Obligations The Sub-Franchisee agrees with the Master Franchisor throughout the Term:
10.01
Commencement conditional on Training Not to commence the business at the Location until the Sub-Franchisee or the persons duly authorized are fully trained to the complete satisfaction of the Master Franchisor. Only such trained persons shall be engaged by the Sub-Franchisee for the management of the Business.
10.02
No Untrained Personnel Not to permit any person to act or assist in the Business without undergoing the proper training required to handle the operations at the Location as per the Sub-Manual provided by the Master Franchisor.
10.03
Training of Staff To ensure that its staff and their replacements and all other persons required under the terms of this Agreement undergo training at periodical intervals in accordance with the Sub-Manual and the necessary modifications and improvement are brought in through such training.
10.04
Training Expenses To pay for all the costs and expenses of whatsoever nature incurred by the Master Franchisor in the performance of the obligations under this Agreement, which fall under the domain of the Master Franchisor’s obligations.
10.05
Grant and Reservations In consideration of the payment of the Initial Fee, the Minimum Fee, the Continuing Fees and Advertising Contribution by the Sub-Franchisee to the Master Franchisor and subject to the agreements and the conditions on the part of the Sub-Franchisee in this Agreement, the Master Franchisor hereby grants to the Sub-Franchisee, the right of using the Mark and Know-How and carrying on the business of retailing the Products only: a) in the Business;
b) at and from the Location; c) within the Territory;
d) for the Term; e) f) 10.06 under the Permitted Name; and in accordance with the Sub-Manual.
The Franchisor according to the terms of the Main Agreement reserves the right to withdraw from its range of Products or add to its existing range of Products, the franchise of further products as launched by the Franchisor in the market in any part of the operations of the Master Franchisor or the SubFranchisee.
10.07 Minimum Working Hours To ensure that the Business is operated for the minimum hours as is usual in the area in which the outlets are situated so as to achieve the maximum operative results. 10.08 Diligence At all times to work diligently to protect and promote the interests of the Master Franchisor.
10.09 Payments To pay to the Master Franchisor or to its order without demand, deduction or set off on the relevant dates, (time being the essence) the Initial Fee and all other costs and expenses as payable in terms of this Agreement by the Sub-Franchisee to the Master Franchisor. 10.10 No competing products a) Not to manufacture, sell, market or use in the course of the provision of the products competing with the Products of the Master Franchisor. b) Not to seek customers for the Products outside the territory. 10.11 No change of Location Not to change and/or shut down (whether temporarily or permanently) the operations of any Location of the Business within the territory without prior written consent of the Master Franchisor. 10.12 Interests in competitors Not acquire any financial interests in the capital of a competing entity or undertaking, which would give the Sub-Franchisee power to influence the economic conduct of such entity or undertaking and/or prejudicially affect the business interests and prospects of the Master Franchisor unless mutually agreed between the parties. 10.13 Compliance To obey the conditions, restrictions and other covenants as contained in the Sub-Manual and the instructions regarding the Business and more particularly the quality control and the customer satisfaction. 10.14 Sales reports To supply to the Master Franchisor, by courier service or registered post or by facsimile or by electronic means (if required by the Master Franchisor), on a weekly basis sales reports and other information in the form stipulated by the Master Franchisor in the Sub-Manual concerning the Business. 10.15 Feedback To communicate to the Master Franchisor any experience gained in the Business, which may improve the quality, presentation, packing etc. of the products and/or the Operating Method and to grant, free of charge, to the Master Franchisor and to other sub-franchisees of the Master Franchisor, a non-exclusive license to use any such improvements. 10.16 Maximum prices Not to advertise or charge customers prices in excess of the prices specified by the Master Franchisor in the Sub-Manual from time to time. 11.17 Disclosure On entering into this Agreement or any other agreement or transaction with the Master Franchisor during the Term, to make full disclosure of all material circumstances and of everything known to it with respect to the subject matter of the contract or transaction, which would be likely to influence the conduct or business of the Master Franchisor 11.18 Pass on information a) To immediately forward, to the Master Franchisor, any trade enquiry from prospective sub-franchisees and other prospective business associations and affiliations or other business leads outside the Territory. b) To pass on any information to the Master Franchisor, which may reduce the turnover of the Business in any way. 11.19 Registration of License of Intellectual Property If and when so required by the Master Franchisor, to register or join with the Master Franchisor in registering particulars of this Agreement or any other relevant agreement or documents with the concerned competent authorities. 11.20 Protection of Intellectual Property Not cause or permit anything, which may damage or endanger the Intellectual Property, as defined hereinbefore, or other intellectual property of the Franchisor or the Franchisor’s title to the Intellectual Property or assist or permit others to do so.
11.21 Secrecy Not at any time, during or after the Term to divulge or allow to be divulged to any person any Confidential Information other than to persons, who have signed the Confidentiality Agreement in the form approved by the Master Franchisor. Only the Signatories of Confidentiality Agreement shall have access to the whole operating process of retail sale of the Products manufactured under the Trade Name “BLUE BELL CREAMERIES”. 11.22 Maintenance of the accounts and other administrative responsibilities and obligations. The Sub-Franchisee shall, at all times during the Term, maintain, accurate and separate records and accounts in respect of the conduct of the Business in terms of this Agreement so as to effectively and smoothly run the operations of the Business during the Term and to ensure that all the statutory compliances in this regard are effectively made so as not to affect, in any manner, the Business prospects or other interests of the Master Franchisor. 11.23 Notice To comply within 90 (Ninety) days with the terms of any Default Notice specifying a breach of the provisions of this Agreement and requiring the breach to be remedied so far as it may be but nothing in this Sub-Clause is intended to require the Master Franchisor to serve notice of any breach before taking any action in respect of it. 11.24 Best endeavours To use its best endeavour to sell the products in terms of this Agreement as per the qualitative control and standards as laid down in the Sub-Manual and as modified or changed from time to time during the Term so as to render the best service to the customers and achieve higher turnover.. 11.25 Protect goodwill To protect and promote the goodwill of the Products and the Franchisor throughout the Term. 11.26 No other Business at the Location It cannot carry on or permit to carry on any other business at the location nor can it extend the scope or the range of Business, unless mutually agreed by the Parties. Business not to be carried on other than from the Location Business or any part of the Business should not be carried from any premises other than the one, which is a Location, duly approved in writing by the Master Franchisor. Orderly conduct It should conduct the Business in an orderly and businesslike manner and to strictly comply with all the policies and operating standards that may from time to time be specified by the Master Franchisor and more particularly, in the Sub-Manual and maintain the standards of the quality in production of the Products, sale and services to the customers. Compliance with laws Conduct the Business in compliance with all the applicable Central and State laws, bye-laws, rules and regulations of the Government, Statutory Authority, Local Authority or any other Authority having jurisdiction over the Territory or any part or on a specific Location. Payment for supplies To promptly and timely pay all the payments with respect to the supply of the raw materials, other materials, products, services and all other charges and levies for the conduct of the Business. Interiors and exteriors of the Location The interior and the exterior finishing of the Location should be as per the arrangement with the Master Franchisor and uniformity should be maintained with respect to the same. All rights and benefits emanating from the Shareholding participation All the benefits, rights, privileges, profits, amenities etc. should be made available at all times to the Master Franchisor which accrue to a member/shareholder of the Sub-Franchisee (directly or indirectly) in the ordinary course as well in the specific circumstances in terms of this Agreement.
11.27
11.28
11.29
11.30
11.31
11.32
11.33
Indemnity To indemnify and keep indemnified the Master Franchisor from and against all and any loss, damage, liability claims, actions, suits and proceedings whether civil or criminal and all costs, charges, expenses, losses or damages suffered or caused including the legal fees and costs incurred by the Master Franchisor because ofa) b) c) any neglect, default, breach, non-observance, non-performance by the Sub-Franchisee and/or its agents, employees etc. in connection with the Business or Location; any other reason so long as such loss, damage, liability, fees or costs resulted from the Business and was not due to any default of the Master Franchisor; and, the Sub-Franchisee not having good and valid power and absolute and un-restricted right to enter into this Agreement and to arrive at all suitable arrangements in respect thereof. The Sub-Franchisee undertakes that it has complied with and fulfilled, in all respects, all the requisite compliances and the requirements of the statutory provisions applicable to the Business. In the event of there being any defect or deficiency or inadequacy in the SubFranchisee’s right to execute this Agreement, the Sub-Franchisee undertakes to indemnify the Master Franchisor against all consequences arising therefrom including damages, losses, costs or any other claims and demands relating thereto.
11.34
No sub-licenses Should not grant any sub-licenses in respect of the Business covered by this Agreement Change in the constitution Because this Agreement and all the rights and licenses granted to the Sub-Franchisee are not assignable, either wholly or partly, save as in accordance with the provisions contained in this Agreement, there cannot be any change in the constitution of the Board of Directors and the management of the Sub-Franchisee without the prior consent of the Master Franchisor. No description as agent Sub-Franchisee cannot describe itself or act as agent or representative of the Master Franchisor except as expressly authorized by this Agreement. Pricing policy Adopt a standard pricing policy for the conduct of the Business during the Term. Employee dues Should promptly and timely pay off all the legitimate dues of the employees of the Business and comply with all the labour laws with respect to conduct of the Business. Staff dress and appearance They should ensure that all staff engaged in the operation of the Business at a Location follows a uniform dress code as adopted and they render competent, sober and courteous services to the customers in accordance with the procedure laid down in the Sub-Manual. No advertisement They should not procure advertisement, signs, entry or any other publicity whether relating to the Business or not or displayed on or at a Location unless the same has been firstly submitted to and approved in its contents and pattern, appearance and size by the Master Franchisor. No other vending machines Should not install and operate at a Location any vending machine other than that of the Franchisor or the Master Franchisor or purchased from a supplier duly authorized by the Franchisor or the Master Franchisor in terms of this Agreement. No warranty Should not make any representations or warranty to the customers other than those, which are permissible under the Sub-Manual. Insurance
11.35
11.36
11.37
11.38
11.39
11.40
11.41
11.42
11.43
They should obtain and keep in full force and effect, at all times, a comprehensive policy or policies of insurance covering the Location, equipments and installations and furniture and fixture and fitting therein against fire, terrorism, natural calamities like earthquake, flood, storm, riots etc. and also covering the public liability for the injury to persons or property within policy limits. Further they should not cause or permit breach of any insurance policy maintained under the terms of this Agreement and timely pay the premium of all the insurance policies so as to maintain them in operation at all points of time.
12.
Termination This Agreement shall terminate as follows:-
12.01
Time On the date of Expiry Non achievement of the breakeven point within the stipulated period In the breakeven sales and/or the minimum performance level as set out in the Sub-Manual is not achieved within Territory, then in such an event, the Master Franchisor, at its sole discretion, may require this Agreement to continue or terminate it by giving the due notice of termination as per the time frame laid down in this Agreement. Fundamental Breach On the occurrence of any of the following events, which are fundamental breaches of this Agreement by Sub-Franchisee : a) b) c) d) Failure to comply with the Default Notice within the time stipulated but the Master Franchisor need not serve any notice before taking an action in respect of any breach; Failure to make the payments on the relevant date and time; Any breach by the Sub-Franchisee of any covenant with respect to the protection of Intellectual Property (Sub-Clause 11.25) or compliance of laws (Sub-Clause 11.34); Any challenge by the Sub-Franchisee to the validity of any part of the Intellectual Property.
12.02
12.03
Provided that the Master Franchisor waive, only through a written communication addressed to the Sub-Franchisee and not otherwise, any breach (including a fundamental breach) of this Agreement by the Sub-Franchisee. 12.04 Insolvency If the Master Franchisor and/or the Sub-Franchisee is dissolved or if a receiver is appointed in respect of the whole or any part of its assets or if the Master Franchisor and/or the Sub-Franchisee makes an assignment for the benefit of or composition with its creditors generally or threatens to do any of these things or if any judgment is made against the Master Franchisor and/or the Sub-Franchisee or if any similar occurrence in any jurisdiction, adversely affects the Master Franchisor and/or the SubFranchisee. Conduct prejudicial If the Sub-Franchisee engages in any conduct prejudicial to the business or the sale and marketing of the Products generally. Low orders If the Minimum Performance is not achieved at any time or during the period stipulated in Sub-Clause 15.18 of this Agreement or for two consecutive Financial Years during the Term provided then in such an event, the Master Franchisor, at its sole discretion, may require this Agreement to continue and may treat such lack of achievement as an event to which Sub-Clause 15.18 shall apply. Change in the management or control If any material change occurs in the management or control of the Business and in particular any change in the Board of Directors or the management of the Sub-Franchisee save in accordance with the provisions of this Agreement.
12.05
12.06
12.07
12.08
Notice If either of the Parties gives ninety days prior written notice to the other party, expiring at any time, not earlier than thirty-six months after the Commencement Date, and the other Party conveys, to the Party giving the notice, its acceptance of termination on the terms set out in the said notice. Termination of the Main Agreement On the termination of the Main Agreement, this Agreement and all sub-franchise arrangements under it shall automatically stand terminated and come to an end and the Franchisor shall have no responsibility or liability whatsoever towards the Sub-Franchisee under the Master Franchisor with respect to the conduct of the Sub-Franchise arrangement.
12.09
13.
Default Notice In the event of any breach by the Sub-Franchisee of any of the provisions of this Agreement other than a fundamental breach as specified before, the Master Franchisor may serve a Default Notice requiring the breach to be remedied within a period of 30 days. Notwithstanding the above, the Franchisor need not serve any notice of the breach before taking any action in respect thereof.
14. 14.01
Termination Consequences Procedure On the termination of this Agreement, the Sub-Franchisee hereby undertakes to do the following: a) b) To dispose of all the stocks in hand in accordance with the Master Franchisor’s directions; To sign such notification of the use of the Intellectual Property as is required by the Master Franchisor; To give due notice of the cessation of the Sub-Franchise Agreement to all persons concerned whether directly or indirectly, in the course of the conduct of the Business; To return to the Master Franchisor all the originals and copies of all the documents and information in any form containing or covering in any way any part of the Intellectual Property including Sub-Manual; Immediately cease carrying on the Business; and To remove all the hoardings, signages, insignias etc. of the Franchisor’s Business from the Location, whether within the Territory or outside the same.
c)
d)
e) f)
15. 15.01
Miscellaneous Change of directors or shareholders In the event of the death or retirement of any director or change of the shareholders of the SubFranchisee, the appointment or substitution of such Director or the transfer of the shareholding, as the case may be, shall be subject to the prior written approval of the Master Franchisor, which shall not be unreasonably withheld and such appointee or substitute Director and transferee shareholder shall be bound by and shall also abide by the terms and conditions of this Agreement. Sale of the Business a) If at any time the Sub-Franchisee wishes to sell, transfer, assign or otherwise part with the Business or any part of it or the Location or any interest or right therein, it shall immediately give a notice of that desire to the Master Franchisor and offer by notice in writing to the Master Franchisor to sell the same to the Master Franchisor;
15.02
b)
If the Master Franchisor accepts the offer of the Sub-Franchisee within a period of 30 (Thirty) days from the date of the receipt of such notice, the Sub-Franchisee shall sell and the Master Franchisor shall purchase the assets as included in the offer on the terms and conditions as agreed to and subject to the conditions mentioned hereinafter for a consideration and such sale shall be completed within a period of 60 (Sixty) days from the date of the acceptance of the offer of purchase by the Master Franchisor; The price and the conditions of such sale and purchase shall be as agreed between the Parties the price representing the net market value of the assets to be sold but without taking into account goodwill or any additional value arising from a sale of Business as a going concern and the conditions shall be such as in the circumstances would be normal and reasonable and in the event of a failure to agree on a price and conditions these shall be settled by a Chartered Accountant chosen by the Parties. The Master Franchisor will be entitled to deduct a sum equivalent to 20% (Twenty Percent) of the value of the assets being purchased by him from the consideration, as payable to the SubFranchisee as a fee for the closure of the Business at a Location; If Master Franchisor declines the offer of the Sub-Franchisee or fails to communicate its acceptance of offer to the Sub-Franchisee within the stipulated time, the Sub-Franchisee shall be free within 3 (Three) months of such notice to sell, transfer, assign or lease or otherwise part with the Business or any part of it or the Location or any part of its interest in them as set out in the notice to the Master Franchisor; The Sub-Franchisee shall pay to the Master Franchisor the reasonable costs and expenses incurred by the Master Franchisor in the assessment of any and each person for approval.
a)
e)
f)
g)
15.03
Master Franchisor’s right to the Operating Method The Sub-Franchisee acknowledges the Master Franchisor’s exclusive rights: a) to the Operating Method and all constituents thereof including, without limitation all the amendments and modifications to it; b) to make such additions or modifications to the Operating Method including the addition, renewal or substitution of intellectual property rights, as may from time to time, appear to the Master Franchisor necessary to promote and improve the Operating Method and to amend or revise the Manual accordingly; c) d) to itself use and grant license to others to use the Operating Method; and, to grant this licence to the Sub-Franchisee.
15.04
Other Licenses The Master Franchisor may, without any liability to the Sub-Franchisee, grant a license to any other entity outside the Territory a) b) c) to sell Products; or to use Intellectual Property; or for any purposes,
except in direct competition with the Sub-Franchisee in the Business in the Territory. The Master Franchisor or any of its other sub-franchisees using the Operating Method may sell to the customers through an outlet located outside the Territory without any liability to the Sub-Franchisee even if the supplies to any such customers are delivered into the Territory. 15.05 Interest
All sums due from either of the Parties to the other, which are not paid on the due date (without prejudice to the rights of the Master Franchisor under this Agreement), shall bear interest from day to day at the annual rate of 18 % (Eighteen Percent) per annum. 15.06 Force Majeure Both Parties shall be released from their respective obligation in the event of any Location or any part thereof being destroyed or damaged by fire (not caused by the willful act or negligence of the SubFranchisee), storm, flood, tempest, earthquake, lightning, enemies, war, riot, civil commotion or any other irresistible force or act beyond the control of the Parties renders performance of this Agreement impossible whereupon: a) b) c) All money due to the Master Franchisor shall be paid immediately; The Sub-Franchisee shall forthwith cease carrying on the Business; and, The Master Franchisor shall not be obliged to continue its obligations under this Agreement save as otherwise provided in this Agreement.
15.07
Severance In case any provision of this Agreement is declared or held to be void, voidable, illegal, invalid or otherwise unenforceable in any jurisdiction under any law applicable, the Parties shall amend or modify or delete that provision in such reasonable manner as achieves the intention of the Parties without illegality or at the discretion of the Master Franchisor, it may be severed from this Agreement and the remaining provisions of this Agreement shall remain in full force and effect.
15.08
Retention of Title c) The Products and goods delivered by the Master Franchisor to the Sub-Franchisee shall remain the sole and absolute property of the Master Franchisor as legal and equitable owner until such time as all money due to the Master Franchisor has been paid to the Sub-Franchisee but shall be at the Sub-Franchisee’s risk from the time of delivery to it; Until delivery to a purchaser, the Sub-Franchisee undertakes to store such goods on its premises separately from its own goods or those of any other person and in a manner which makes them readily identified as the Master Franchisor’s goods; The Sub-Franchisee’s rights to possession of goods shall cease if it does anything or fails to do anything which would entitle the receiver to take possession of the assets.
d)
e)
15.09
Supersedes prior Agreements and changes/modifications This Agreement supersedes any prior agreement between the Parties, whether written or oral, and any such prior agreements are cancelled as at the Commencement Date but without prejudice to any rights which have already accrued to either of the Parties.
15.10
Low sales The Master Franchisor may terminate this Agreement if the Minimum Performance arising from the Business at the Location is not achieved within 2 (Two) years of the Commencement Date of this Agreement or for a continuous period of 12 (Twelve) months at any time thereafter during the Term provided.
15.11
Payment not on time In the event that the Sub-Franchisee fails to pay any money due to the Master Franchisor on time, the Master Franchisor may, at its option:
a)
cease immediately to take orders from and to deliver goods and services to the SubFranchisee; and/or, impose whatever credit limit it considers appropriate in respect of the Business of the SubFranchisee.
b)
15.12
Change of address Each of the Parties shall give notice to the other of change or acquisition of any address or telephone, fax, telex or similar number as soon as practicable and in any event within 48 (Forty-eight) hours of such change or acquisition.
15.13
Notices/Communications Any notice, letter, communication etc. to be made, communicated to either of the Parties shall be in writing and shall be deemed to be duly communicated only if the notice or letter or communication is addressed to the other Party at the addresses as mentioned in this Agreement or such other address, as may be intimated by one Party to the other in this behalf and sent by courier service or registered post or by facsimile or by electronic means (if required by the Master Franchisor), and shall be deemed to have been received by the addressee within 72 (seventy-two) hours of posting or 24 (twenty-four) hours if sent by facsimile to the correct facsimile number of the addressee.
15.14
Dispute Resolution & mechanism a) Arbitration Clause: That in the event of any dispute or difference between the Parties regarding this Agreement or otherwise, the Parties shall enter, in good faith, into negotiations aimed at finding an amicable solution. If the dispute cannot be resolved in a satisfactory manner, either Party may refer the matter to a sole Arbitrator to be nominated by both the Parties with mutual consent. The decision of the Arbitrator shall be binding and final. The provisions of the Arbitration and Conciliation Act, 1996 or any other statutory amendment, for the time being in force, shall apply.
b) Jurisdiction of Courts: That this Agreement and the rights and obligations of the Parties under this Agreement shall be construed and enforced in accordance with the laws of India. 15.15 Costs & expenses Each of the Parties shall pay the costs and expenses incurred by it in connection with this Agreement including the legal costs in connection with the negotiation and preparation of this Agreement and the consummation of the transactions contemplated hereby.
Signed by For and on behalf of M/s. Blue Bell Creameries
Tanya Sharma Partner Signed by For and on behalf of M/s. __________________________
_________________
Director WITNESSES: 1. Name : _____________________ s/o/d/o/w/o: _________________ Address : ___________________ ___________________ Occupation : _________________ I.D. No. : ___________________
2. Name : _____________________ s/o/d/o/w/o: _________________ Address : ___________________ ___________________ Occupation : _________________ I.D. No. : ___________________
Group’s Contribution:
1. Right to grants and reservation: Grant by the Master Franchisor to the Sub-Franchisee to use its Mark and Know-How of the retailing of products with the reservations over Business, Location, Territory, Term and Permitted name in accordance with the Sub-manual. Right of withdrawal from or addition to the existing range of products by the Master Franchisor to the Sub Franchisee. 2. Condition over competing products: Not to seek customers for the products outside the specified territory. Knowledge/Feedback: The Sub-Franchisee must share with the Master Franchisor any experience or knowledge gained during the process of business which may help in the operations of the Master Franchisor and/or other subfranchisees. The Master Franchisor will have a non-exclusive right over the use of such improvements, granted for free by the Sub-Franchisee. Pass on information: The Sub-Franchisee must share each and every information with the Master Franchisor, which may, in any way, reduce or increase the turn-over of the business. Agency: The Sub-Franchisee cannot describe itself or act as agent or representative of the Master Franchisor except as expressly authorized by this Agreement. No advertisement: The Sub- Franchisee should not procure advertisement, signs, entry or any other publicity whether relating to the Business or not to be displayed on or at a Location unless the same has been firstly submitted to and approved in its contents and pattern, appearance and size, by the Master Franchisor.
3.
4.
5.
6.
7.
Breach of contract: In case of failure to comply with the Default Notice, by the Sub-Franchisee, within the time stipulated, the Master Franchisor need not serve any notice before taking an action in respect of any breach. Cessation of Sub-Franchisee: The Sub-Franchisee must give due notice of the cessation of the Sub-Franchise Agreement to all persons concerned whether directly or indirectly, in the course of the conduct of the Business. Deduction of fee: The Master Franchisor will be entitled to deduct a sum equivalent to 20% (Twenty Per cent) of the value of the assets being purchased by him from the consideration, as payable to the Sub-Franchisee as a fee for the closure of the Business at a Location.
8.
9.
10. Interest: All sums due from either of the Parties to the other, which are not paid on the due date (without prejudice to the rights of the Master Franchisor under this Agreement), shall bear interest from day to day at the annual rate of 18 % (Eighteen Per cent) per annum. 11. Possession of assets: The Sub-Franchisee’s rights to possession of goods shall cease if it does anything or fails to do anything which would entitle the receiver to take possession of the assets. 12. Low Sales: The Master Franchisor may terminate this Agreement if the Minimum Performance arising from the Business at the Location is not achieved within 2 (Two) years of the Commencement Date of this Agreement or for a continuous period of 12 (Twelve) months at any time thereafter during the Term provided by the Sub-Franchisee. 13. Arbitration Clause: In case of the involvement of an arbitrator, owing to any dispute or difference between the parties regarding this Agreement or otherwise, the provisions of the Arbitration and Conciliation Act, 1996 or any other statutory amendment, for the time being in force, shall apply.
Group’s review:
The given Franchisee agreement covers all of the following topics discussed in class:
1.
A contract should be an agreement between [b/w] 2 OR more parties: The agreement here is between M/s XYZ (the Master Franchisor) and M/s ABC (the Sub-Franchisee). Offer: ABC made an offer which was accepted by XYZ i.e. Valid acceptance of offer. A lawful consideration: Fee paid by ABC to XYC in return for the Sub-Franchisee (supply of goods). ? It is not forbidden by law. ? It does not defeat any provision of law. ? It does not cause any injustice OR injury to another person OR his property. ? It is not opposed as public policy OR regarded as immoral. ? It is not fraudulent. It is terms of both cash and kind.
2.
3.
4.
The agreement is not expressly declared to be void by law
5.
The terms must be certain: The location, terms of agreement, mark/logo, fee payment, operation method, products etc. have been explicitly described and there is no vagueness in the agreement. All the terms have been defined and described in detail in the parts 1-7. Free consent of the parties Both the Sub-Franchisee (ABC) and the Master Franchisor (XYZ), have entered into the contract under free consent. Parties are competent to contract Both the Sub-Franchisee (ABC) and the Master Franchisor (XYZ) do not fall in any category of ‘Parties incompetent to contract’. The contract is enforceable by law The agreement between XYZ and ABC is enforceable by law as it clearly mentions: ? Compliance with law ? Fundamental breach ? Default notice ? Notice/Communications ? Arbitrations
6.
7.
8.
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